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Mary Jo White Spins the SEC’s Revolving Door

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William D. Cohan

March 18 (Bloomberg) -- One of the oft-repeated justifications for why Wall Street must be regulated by Wall Streeters is that what goes on there is both so complex and so essential that only those who have been part of it can be trusted to oversee it.

This argument is bunk, of course. It’s nothing more than a way for the financial institutions, and the many Washington politicians who benefit from their considerable largesse, to make sure the status quo gets maintained.

Instead of getting change we can believe in, we had the spectacle of Mary Jo White’s March 12 confirmation hearing before the Senate Banking Committee on her nomination as chairman of the Securities and Exchange Commission. The highlight was White, the former U.S. attorney in the Southern District of New York turned rainmaker partner at the law firm Debevoise & Plimpton LLP, explaining how her years of legal work for the big Wall Street banks won’t influence what enforcement decisions the SEC makes against the very firms that made her -- and her husband, John White, a top partner at Cravath, Swaine & Moore LLP -- very rich. Their disclosure form indicates they are worth more than $16 million.

Senator Sherrod Brown, a Democrat from Ohio, asked White to explain how she would be able to carry out the commission’s mandate -- protecting the small investor -- from exploitative behavior by the big guys on Wall Street. “Nobody questions your integrity, but we need some reassurance,” he said. “What have you done over the last decade” on behalf of ordinary investors?

Recusing Herself

White responded that her work representing Wall Street “does not change me as a person. It doesn’t mean I embrace the policy thoughts of any of my clients.” Maybe so, but what White’s multitude of conflicts does mean is that she will be recusing herself from regulating at least two of her big former clients -- JPMorgan Chase & Co. and UBS AG -- for a year or so. She also said she would recuse herself from matters involving Cravath, and that her husband would no longer be an equity partner of the firm. For good measure, she told Brown: “The American public will be my client, and I will work as zealously as is possible on behalf of them.” We shall see.

As Brown said, there seems little question that Mary Jo White is a person of high integrity. Yet after nearly eight years of a toothless SEC led by Chistopher Cox, the Republican former House member from California, and Mary Schapiro, who was previously the head of Wall Street’s self-regulatory organization, don’t we need a chairman who will not have to think twice about taking on the banks? Don’t we need an SEC chairman who will scare the living daylights out of Wall Street, rather than someone who used to depend on it to make a living? (My choice for the job was former New York State Governor Eliot Spitzer, who had a proven track record of standing up to Wall Street as the state’s attorney general.)

Instead, we get stuck again and again with people whose ties to Wall Street run deep. Indeed, the “revolving door” between Wall Street and Washington seems to have been spinning faster than ever during the first five years of Barack Obama’s administration, contrary to what candidate Obama led us to expect. Is it just a coincidence that the president’s most important economic advisers -- Jack Lew, the Treasury secretary; Sylvia Mathews Burwell, his choice to head the Office of Management and Budget; Gene Sperling, the director of the National Economic Council; and Michael Froman, a senior White House economic adviser -- are all acolytes of Robert Rubin, the former Treasury secretary and longtime Wall Street honcho at Goldman Sachs Group Inc. and Citigroup Inc.?

Losing Sleep

On the other side of that spinning door, is it coincidental that Schapiro was just nominated to be on the board of directors of General Electric Co.? Or that Lanny Breuer, the outgoing assistant attorney general for the criminal division of the Justice Department, announced he is returning to work at the powerful law firm Covington & Burling LLP? This is the same Lanny Breuer who, infamously, told the New York Bar Association in a September 2012 speech that “in large multinational companies, the jobs of tens of thousands of employees can be at stake. And, in some cases, the health of an industry or the markets are a real factor. Those are the kinds of considerations in white-collar-crime cases that literally keep me up at night, and which must play a role in responsible enforcement.” As a federal enforcer, Breuer lost sleep over the idea that banks might be made to pay for their transgressions.

Now Schapiro’s head of enforcement, Robert Khuzami, is leaving the government as well. (He was previously -- surprise, surprise -- general counsel for Deutsche Bank AG’s operations in America.) He hasn’t announced his next job, but one suspects that the one-year “cooling off” period required by the SEC, during which he cannot directly lobby the commission for a client, won’t diminish his job prospects or usefulness to Wall Street.

I could go on and on and on. But you get the point. Attorney General Eric Holder confirmed to Congress on March 6 something that we all have long suspected: Wall Street has become too powerful to prosecute.

The unexplained mystery is why Obama keeps going back to Wall Street for appointees to important regulatory positions when there are thousands of qualified people elsewhere who understand how Wall Street works and would be fearless in holding it accountable for its bad behavior.

(William D. Cohan, the author of “Money and Power: How Goldman Sachs Came to Rule the World,” is a Bloomberg View columnist. He was formerly an investment banker at Lazard Freres, Merrill Lynch and JPMorgan Chase. The opinions expressed are his own.)

To contact the writer of this article: William D. Cohan at

To contact the editor responsible for this article: Tobin Harshaw at

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